Ad-Sol Nissin Corporation Q2 FY2026 earnings call

Core H1 Financial Results

• Total H1 revenue hit 8.506 billion yen, up 11.2% YoY, a new Q2 record high
• Gross margin improved 1.0 percentage point YoY driven by contract term renegotiation and the shift to higher-margin consulting
• Operating profit reached 1.103 billion yen, up 25.4% YoY, with an operating margin of 13.0%, both record highs

Next-Generation SI Business Model Progress

• Consulting: 58 consultants are currently focused on GIS, LeapX, and AI, generating new orders from customer issue-based proposals. The firm targets a 100+ consultant structure by the end of the current fiscal year to expand consulting revenue and improve profitability.
• GIS (Geographic Information System): Demand is growing across social infrastructure firms centered on the electric power segment, with multiple consulting projects ongoing for facility maintenance and legacy system DX. The proprietary securities analysis solution DOCOYA has received industry attention and surpassed 100 client requests for proposals.
• LeapX (Agile Development & Data Utilization): 9 orders were secured in H1 across agile, cloud, and data management verticals. The firm's unique offering of offshore agile development in Da Nang, Vietnam, helped win multiple AgileLeap orders, and a D×DLeap data management order was secured for a credit card client in the fast-growing payment/card segment. The firm targets 100 agile engineers by Fiscal 2027, and is developing hybrid agile development combining waterfall and agile methodologies to lower barriers for firms new to agile.
• AI +Aidea Service: Leveraging decades of AI research and industry partnerships (including collaboration with AIST and the University of Tokyo), the firm launched its end-to-end +Aidea AI consulting and engineering service in October. The service supports clients from ideation through system design, development, and post-implementation effect measurement. The firm is building a 100-person AI expert team to scale this offering. The firm has already secured multiple orders for AI system construction and AI quality consulting, and is integrating its proprietary AdsolChat generative AI to automate development tasks for internal efficiency.

Human Capital Strengthening

• New graduate hiring exceeded the original 70-person target, with 72 accepted offers. Pre-joining training is already underway to build foundational skills in agile development, AI, and data management
• The firm received the "Kurumin" certification from Japan's Ministry of Health, Labour and Welfare for its expanded childcare support policies to improve employee engagement

Shareholder Return

• The firm announced an increased year-end dividend, bringing the full-year planned dividend to 41 yen per share (4 yen up from the original forecast, 11 yen up year-over-year), which is on track to mark 16 consecutive years of dividend increases.

Adsol Nisshin has two operating segments for the first half (H1) of Fiscal 2026:

1. Social Infrastructure Business: Revenue reached 5.49 billion yen, an increase of 13.4% year-over-year. Growth was driven by increased sales in energy (centered on electric power), transportation, and public sectors. This segment contributed 64.6% of total H1 revenue.
2. Advanced Industry Business: Revenue reached 3.016 billion yen, an increase of 7.3% year-over-year. Growth came from expanding DX and data management projects in the payment and card领域. This segment contributed 35.4% of total H1 revenue.

As leading indicators, total orders received increased 20.2% YoY to 8.631 billion yen, and total order backlog increased 17.7% YoY to 3.373 billion yen, both record highs for a Q2.

• Full-year Fiscal 2026 guidance was upward revised: full-year revenue was increased 0.7 billion yen to 17.1 billion yen, and full-year operating profit was revised upward to 2.1 billion yen, with the revision driven by stronger-than-expected demand for DX and system modernization projects across core segments
• The upward revision was enacted even as the firm continues to proactively invest in strategic initiatives (AI capability building, consultant development) that will drive future growth
• Management reaffirmed its commitment to execute growth plans and meet the revised full-year targets

The main challenge identified by management is accelerating the build-out of the consulting function to reach its 100-consultant target and achieve full operational capability, which is a stated priority and core bottleneck for the firm's shift to the next-generation SI business model. No material operational failures or unforeseen risks were discussed in the provided transcript.

Q: Which business areas beat the original full-year guidance to drive the upward revision? / A: Electric power (energy) and payment/card (services) areas have been much stronger than expected, and growth has also outperformed expectations in the railway sub-segment of transportation. All of these areas are seeing rising demand for DX and modernization projects that align with the firm's mid-term strategy, and the strong demand is expected to continue into the second half. These higher-margin businesses are also driving the upward revision to operating profit.

Q: Why is Adsol Nisshin still expanding hiring when AI enables efficiency that reduces personnel needs? / A: To achieve the firm's stated growth goals of building a 100-person consultant team and 100-person AI expert team to shift to the next-generation SI model, there is still a material shortage of specialized personnel at the firm's current size of ~600 employees. While AI is being used to improve internal efficiency, building a workforce of highly skilled talent that can leverage AI effectively is required to execute growth strategy, so hiring expansion will continue.

Q: What is the competitive differentiation for the new +Aidea AI service? / A: +Aidea is not just a generic AI tool or package; it aggregates decades of the firm's research and practical experience in AI quality management and AI governance. Many firms struggle to generate real value from generic AI deployments, and +Aidea provides end-to-end support to help clients maximize AI effectiveness with proper quality and governance controls. This deep, research-backed expertise in AI quality and governance is the firm's key competitive advantage over generic third-party AI services.

Q: Which of the firm's priority areas are ahead of or behind plan, and what are the key gaps? / A: Agile development and data management are progressing much faster than expected: growing domestic demand for agile has expanded order flow, and the firm's Da Nang offshore agile team and branded AgileLeap offering have created strong differentiation. Data management has also scaled beyond the core social infrastructure segment to new industries after the firm set up a dedicated data management organization. The main gap and priority challenge is accelerating the build-out of the consulting function to reach the 100-person target and full operational capability, which is the top near-term priority.